Question 1

The total direct materials variance is best explained by:

Accepted Answer

A) the variance cannot be explained unless the budget is flexed to actual production. 
B) better use of materials by the production manager. 
C) a change in price of the raw materials. 
D) the production manager failing to control the material usage. 
A) the variance cannot be explained unless the budget is flexed to actual production. 
B) better use of materials by the production manager. 
C) a change in price of the raw materials. 
D) the production manager failing to control the material usage. A

Question 2

Managements interest in variances is due to:

Accepted Answer

A) the need to gain the information that may assist them to put things back in control. 
B) the desire to gain the maximum information. 
C) the need to compensate employees. 
D) the desire to check all details. 
A) the need to gain the information that may assist them to put things back in control. 
B) the desire to gain the maximum information. 
C) the need to compensate employees. 
D) the desire to check all details. A

Question 3

Which of the following could not be a possible cause of an adverse (unfavourable)materials usage variance?

Accepted Answer

A) Faulty machinery. 
B) Poor quality materials. 
C) An increase in the price of the raw materials. 
D) Inexperienced workers. 
A) Faulty machinery. 
B) Poor quality materials. 
C) An increase in the price of the raw materials. 
D) Inexperienced workers. C

Question 4

Which statement is not correct?

Accepted Answer

A) The existence of budgets tends to provide motivation to improve performance. 
B) The 'top down' approach to budgeting tends to improve motivation. 
C) Setting demanding, but achievable, targets is a better motivator than setting undemanding targets. 
D) Unrealistic targets have adverse effects on managers' performance. 
A) The existence of budgets tends to provide motivation to improve performance. 
B) The 'top down' approach to budgeting tends to improve motivation. 
C) Setting demanding, but achievable, targets is a better motivator than setting undemanding targets. 
D) Unrealistic targets have adverse effects on managers' performance.

Question 5

Use the information below to answer the following questions. $$\begin{array} { l c c } 
& \text { Budget for April } & \text { Actual for April } \
\text { Output } & 40,000 \text { units } & 40,000 \text { units } \
\text { Sales } & \$ 400,000 & \$ 400,000 \
\text { Raw materials } & \$ 80,000 & \$ 88,000 \
\text { Labour } & \$ 200,000 & \$ 180,000 \
\text { Overheads } & 225,000 & 305,000
\end{array}$$
-Refer to the table above. The raw materials variance can best be described as:

Accepted Answer

A) an adverse variance resulting from a rise in the price of raw materials. 
B) an adverse variance resulting from excessive use of raw materials and/or an increase in their price. 
C) an adverse variance resulting from excessive use of raw materials. 
D) a favourable variance resulting from efficient use of raw materials. 
A) an adverse variance resulting from a rise in the price of raw materials. 
B) an adverse variance resulting from excessive use of raw materials and/or an increase in their price. 
C) an adverse variance resulting from excessive use of raw materials. 
D) a favourable variance resulting from efficient use of raw materials.

Question 6

Leonard Company is preparing its second quarter production budget. Projected sales in units are 600 for April, 680 for May, and 750 for June. Leonard's policy is to have finished goods inventory equal to 20 per cent of the next month's projected unit sales. What should be the production quota for May?

Accepted Answer

A) 830 units. 
B) 694 units. 
C) 680 units. 
D) 666 units. 
A) 830 units. 
B) 694 units. 
C) 680 units. 
D) 666 units.

Question 7

One of the approaches to setting budgets is known as the 'top down' approach. This is best described as:

Accepted Answer

A) production budget set first and working from this to other budgets. 
B) budget targets set at the lowest level of management. 
C) setting the sales forecast and working from this to other budgets. 
D) budget targets set by senior management. 
A) production budget set first and working from this to other budgets. 
B) budget targets set at the lowest level of management. 
C) setting the sales forecast and working from this to other budgets. 
D) budget targets set by senior management.

Question 8

What is the calculation of closing inventory for a finished goods inventory budget?

Accepted Answer

A) (opening balance plus inventories manufactured)less sales of finished goods. 
B) (opening balance plus sales of finished goods)less inventories manufactured. 
C) (opening balance plus inventories manufactured)plus cash sales of finished goods. 
D) none of the above. 
A) (opening balance plus inventories manufactured)less sales of finished goods. 
B) (opening balance plus sales of finished goods)less inventories manufactured. 
C) (opening balance plus inventories manufactured)plus cash sales of finished goods. 
D) none of the above.

Question 9

What is a common feature of most budgets?

Accepted Answer

A) the budget period is broken into months. 
B) a columnar format. 
C) a section for non-cash expenses such as doubtful debts and depreciation. 
D) Both A and B. 
A) the budget period is broken into months. 
B) a columnar format. 
C) a section for non-cash expenses such as doubtful debts and depreciation. 
D) Both A and B.

Question 10

The debtor's budget shows the planned amount owing from credit sales. The closing balance of the accounts receivable account is calculated as follows:

Accepted Answer

A) (opening balance plus sales)less cash receipts. 
B) (opening balance less sales)less cash receipts. 
C) (opening balance less sales)plus cash receipts. 
D) (opening balance plus sales)plus cash receipts. 
A) (opening balance plus sales)less cash receipts. 
B) (opening balance less sales)less cash receipts. 
C) (opening balance less sales)plus cash receipts. 
D) (opening balance plus sales)plus cash receipts.

Question 11

Use the information below to answer the following questions. $$\begin{array} { l c c } 
& \text { Budget for April } & \text { Actual for April } \
\text { Output } & 40,000 \text { units } & 40,000 \text { units } \
\text { Sales } & \$ 400,000 & \$ 400,000 \
\text { Raw materials } & \$ 80,000 & \$ 88,000 \
\text { Labour } & \$ 200,000 & \$ 180,000 \
\text { Overheads } & 225,000 & 305,000
\end{array}$$
-Refer to the table above. The labour variance can best be described as:

Accepted Answer

A) an adverse variance resulting from excessive use of labour and/or a rise in the hourly rate of pay. 
B) a favourable variance resulting from the efficient use of labour and/or a reduction in the hourly pay rate. 
C) being caused by an increase in the pay rate for labour. 
D) being caused by more efficient labour. 
A) an adverse variance resulting from excessive use of labour and/or a rise in the hourly rate of pay. 
B) a favourable variance resulting from the efficient use of labour and/or a reduction in the hourly pay rate. 
C) being caused by an increase in the pay rate for labour. 
D) being caused by more efficient labour.

Question 12

Xon Company is planning to purchase fixed assets at a cost of $200,000. The planned delivery date is 1st February 2018. A deposit of $20,000 is to be paid on 1/11/17. The amount that will appear in the cash budget for November 2017 is:

Accepted Answer

A) $190,000 outflow. 
B) $200,000 outflow. 
C) $20,000 outflow. 
D) $20,000 inflow. 
A) $190,000 outflow. 
B) $200,000 outflow. 
C) $20,000 outflow. 
D) $20,000 inflow.

Question 13

Use the information below to answer the following questions.
Patiomaster Products manufactures patio furniture. The estimated numbers of sets to be sold for the last three months of 2018 is: $$\begin{array} { l r } 
\text { Month } & \text { Sales } \
\hline \text { October } & 10,000 \
\text { November } & 7,000 \
\text { December } & 5,000 \
\text { January } & 6,000
\end{array}$$ Finished goods inventory at the end of September is 2,000 units. Finished goods inventory is set at 30 percent of next month's sales.
-Refer to the table above. How many sets of patio furniture will be produced in December 2018?

Accepted Answer

A) 7,200 units. 
B) 6,200 units. 
C) 5,200 units. 
D) 6,400 units. 
A) 7,200 units. 
B) 6,200 units. 
C) 5,200 units. 
D) 6,400 units.

Question 14

If the opening cash balance at the beginning of the month is $27,500, total cash inflows for the month are $38,000 and total cash outflows are $98,000 the opening cash balance at the beginning of the next month is:

Accepted Answer

A) $67,500 (surplus). 
B) $12,500 (surplus). 
C) $32,500 (deficit). 
D) cannot be calculated. 
A) $67,500 (surplus). 
B) $12,500 (surplus). 
C) $32,500 (deficit). 
D) cannot be calculated.

Question 15

Use the information below to answer the following questions.
Patiomaster Products manufactures patio furniture. The estimated numbers of sets to be sold for the last three months of 2018 is: $$\begin{array} { l r } 
\text { Month } & \text { Sales } \
\hline \text { October } & 10,000 \
\text { November } & 7,000 \
\text { December } & 5,000 \
\text { January } & 6,000
\end{array}$$ Finished goods inventory at the end of September is 2,000 units. Finished goods inventory is set at 30 percent of next month's sales.
-Refer to the table above. If a patio set costs $100 to produce, what will be the cost of sales in the budgeted statement of comprehensive income for the period October to December 2018?

Accepted Answer

A) $1,800,000. 
B) $1,900,000. 
C) $2,200,000. 
D) $1,500,000. 
A) $1,800,000. 
B) $1,900,000. 
C) $2,200,000. 
D) $1,500,000.

Question 16

How can a budget help in decision making?

Accepted Answer

A) by identifying excesses or shortages of cash. 
B) by predicting purchase requirements for raw materials. 
C) by identifying future resource constraints. 
D) all of the above. 
A) by identifying excesses or shortages of cash. 
B) by predicting purchase requirements for raw materials. 
C) by identifying future resource constraints. 
D) all of the above.

Question 17

Where budget targets have proven to be unrealistically optimistic, management is best advised to:

Accepted Answer

A) revise budgets to match actual results. 
B) revise budgets into the realm of achievability. 
C) insist that junior management conform to budgets. 
D) ignore budgets and allow managers to use their own initiative. 
A) revise budgets to match actual results. 
B) revise budgets into the realm of achievability. 
C) insist that junior management conform to budgets. 
D) ignore budgets and allow managers to use their own initiative.

Question 18

Use the information below to answer the following questions.
Sales in December were $960,000. Projected sales for the first quarter of 2018 are: $$\begin{array} { l l } 
\text { January } & \$ 1,080,000 \
\text { February } & \$ 1,300,000 \
\text { March } & \$ 1,280,000
\end{array}$$ Sales are 20% cash and 80% on credit. Debtors pay in the month following the sale.
-Refer to the table above. What will be the balance of accounts receivable on 1 March?

Accepted Answer

A) $1,200,000. 
B) $1,040,000. 
C) $1,280,000. 
D) $864,000. 
A) $1,200,000. 
B) $1,040,000. 
C) $1,280,000. 
D) $864,000.

Question 19

Where there is a significant favourable variance management is best advised to:

Accepted Answer

A) ignore it, because it does not cause immediate concern. 
B) investigate, because it may mean that targets are unrealistically low. 
C) investigate it to find out why things are not going according to plan. 
D) Both B and C. 
A) ignore it, because it does not cause immediate concern. 
B) investigate, because it may mean that targets are unrealistically low. 
C) investigate it to find out why things are not going according to plan. 
D) Both B and C.

Question 20

Which of the following could be the cause of a favourable materials price variance?

Accepted Answer

A) The price of materials in the original budget was set too high. 
B) A discount on the purchase of materials. 
C) Well-trained production workers. 
D) Both A and B. 
A) The price of materials in the original budget was set too high. 
B) A discount on the purchase of materials. 
C) Well-trained production workers. 
D) Both A and B.

The total direct materials variance is best explained by:

Managements interest in variances is due to:

Which of the following could not be a possible cause of an adverse (unfavourable)materials usage variance?

Which statement is not correct?

One of the approaches to setting budgets is known as the 'top down' approach. This is best described as:

What is the calculation of closing inventory for a finished goods inventory budget?

What is a common feature of most budgets?

The debtor's budget shows the planned amount owing from credit sales. The closing balance of the accounts receivable account is calculated as follows:

Xon Company is planning to purchase fixed assets at a cost of $200,000. The planned delivery date is 1st February 2018. A deposit of $20,000 is to be paid on 1/11/17. The amount that will appear in the cash budget for November 2017 is:

If the opening cash balance at the beginning of the month is $27,500, total cash inflows for the month are $38,000 and total cash outflows are $98,000 the opening cash balance at the beginning of the next month is:

How can a budget help in decision making?

Where budget targets have proven to be unrealistically optimistic, management is best advised to:

Where there is a significant favourable variance management is best advised to:

Which of the following could be the cause of a favourable materials price variance?

Introduction to Accounting

Measuring and Reporting Financial Position

Measuring and Reporting Financial Performance

Introduction to Limited Companies

Regulatory Framework for Companies

Measuring and Reporting Cash Flows

Corporate Social Responsibility and Sustainability Accounting

Analysis and Interpretation of Financial Statements

Cost-Volume-Profit Analysis and Relevant Costing

Full Costing

Capital Investment Decisions

The Management of Working Capital

Financing the Business

Filters

Exam 11: Budgeting

The total direct materials variance is best explained by:

Managements interest in variances is due to:

Which of the following could not be a possible cause of an adverse (unfavourable)materials usage variance?

Which statement is not correct?

One of the approaches to setting budgets is known as the 'top down' approach. This is best described as:

What is the calculation of closing inventory for a finished goods inventory budget?

What is a common feature of most budgets?

The debtor's budget shows the planned amount owing from credit sales. The closing balance of the accounts receivable account is calculated as follows:

Xon Company is planning to purchase fixed assets at a cost of $200,000. The planned delivery date is 1st February 2018. A deposit of $20,000 is to be paid on 1/11/17. The amount that will appear in the cash budget for November 2017 is:

If the opening cash balance at the beginning of the month is $27,500, total cash inflows for the month are $38,000 and total cash outflows are $98,000 the opening cash balance at the beginning of the next month is:

How can a budget help in decision making?

Where budget targets have proven to be unrealistically optimistic, management is best advised to:

Where there is a significant favourable variance management is best advised to:

Which of the following could be the cause of a favourable materials price variance?

Introduction to Accounting

Measuring and Reporting Financial Position

Measuring and Reporting Financial Performance

Introduction to Limited Companies

Regulatory Framework for Companies

Measuring and Reporting Cash Flows

Corporate Social Responsibility and Sustainability Accounting

Analysis and Interpretation of Financial Statements

Cost-Volume-Profit Analysis and Relevant Costing

Full Costing

Capital Investment Decisions

The Management of Working Capital

Financing the Business

Filters